Micron Technology Inc (NASDAQ: MU) was one of the markets biggest winners today as it’s stock price shot up due to solid financial news amidst increasingly bearish expectations for the firm. Shares of the chip producer ended the day with a 9.6 percent gain after reading heights as much as $44.21 per share after the company reported its quarterly earnings late Wednesday, making it the single best day for Micron shares in over a year.
The reported second-quarter earnings showed revenues of $5.8 billion, a figure that’s down 21 percent from the previous year as management cites “worse-than-expected pricing trends” for dynamic random access memory chips (DRAM). This has changed significantly over the past couple of years when the company saw earnings soar in what was a memory-chip boom.
“They are reducing capacity utilization by 5%, which is generally perceived as a very good thing for bringing the market back in to balance (hence good for price recovery),” said Mark Newman, an analyst at Bernstein Research, in an email.
Following the announcement and the subsequent investor conference call, eight analysts have hiked their price targets on the stock, while three chose to lower their targets instead. Currently, out of the 33 analysts who cover the company, 19 have “buy” ratings for the company, 13 have “hold,” and only one has a “sell” rating.
BMO Capital analyst Ambrish Srivastava, who currently has an “outperform” rating and a $50 price target on the stock, would go on to add that “Not that we would know anything about it but we have heard that hangovers can be tough. Memory fundamentals are plain nasty. Visibility is limited, how can it be anything but, given the tight supply/ASP driven buying frenzy from last year? However, we think Micron is taking all the right steps.”
MKM partners analyst Ruben Roy, who also has a target price of $50 for the company’s stock went on to credit Micron’s management team, saying that he felt they were handling themselves well in a challenging environment. “We continue to remain positive on the longer-term outlook for memory given content is likely to increase as emerging applications such as AI, autonomous driving, machine learning, and data analytics/data science continue to evolve,” Roy said. “Within this backdrop, we continue to see industry participants delivering much improved levels of profitability relative to previous cycles.”
Just yesterday, CNBC’s Trading Nation was speculating that these financial reports could “make-or-break” the company’s stock, suggesting that prices could drop another 15 percent depending on the news. Today’s performance, while still slightly below what analysts would have liked to see in terms of the company’s financial results, is considered something of a “relief rally” for the company, which has been struggling over the past 12 months in a difficult sector economy.
Micron Technology Inc Company Profile
Micron has historically focused on providing DRAM for PCs and servers. The firm has expanded into the NAND flash memory market over the past decade. It increased its DRAM scale with the purchase of Elpida (completed in mid-2013) and Inotera (completed in December 2016). – Warrior Trading News